EUR: Focus on Activity Data & BoE Tomorrow
- Mixed performance for the Euro against G10 peers on Wednesday, as softer US ISM Services prompts some EURUSD strength, however, the significant yen outperformance has weighed heavily on EURJPY (-1.00%), with price action supported by overnight Japanese wage figures.
- While single currency sentiment continues to be impacted by Eurozone growth concerns, there will be some attention on the 'core' figure of German factory orders on Thursday to provide the latest update. However, the data is unlikely to alter the narrative of industrial weakness, which appears well factored in at this juncture.
- More importantly, the Bank of England will headline tomorrow, and we think its Bank Agent's Pay Settlement Survey could provide some signal on policy ahead. EURGBP’s renewed weakness this week will provide some focus on the cross, having pulled further away from trendline resistance in recent weeks.
- Short-term resistance for the cross stands at 0.8363/69, the Jan 3 high / 20-day EMA, while initial support would be located at 0.8248, Monday’s low. Below here, the key 2022 low at 0.8203 comes back into focus, the weakest point of a multi-year range.
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US STOCKS: Chip Makers, Interactive Media Shares Leading First Half Gainers
Stocks are trading higher early Monday, tech sector strength helping SPX Eminis rise to the best levels since December 27. Currently, the DJIA trades 353.54 points (0.83%) at 43082.63, S&P E-Minis up 76.5 points (1.28%) at 6065, Nasdaq up 351.3 points (1.8%) at 19971.12.
Semiconductor makers continued to benefit from news announced late Friday that Microsoft plans to invest $80B in AI-enabled data centers - at least of which are expected to be in the US. Leading gainers included Micron Technology +10.98%, Super Micro Compute +10.17%, Teradyne +6.40% while First Solar, Nvidia, KLA Corp, Applied Materials ad Lam Research all gained 5-6% in the first half.
Meanwhile, interactive media and entertainment shares buoyed the Communication Services sector with Alphabet +3.18%, Meta +2.99% and Paramount +2.44%.
On the flipside, Utility and Real Estate sectors underperformed early Monday, multi-energy providers weighing on the former: Eversource -1.88%, Sempra -1.63%, Ameren -1.60%. Office and Residential investment trusts weighed on the Real Estate sector with BXP Inc -2.34%, Camden Property -1.90%, Kimco -1.64%.
Reminder, the next round of quarterly earnings kicks off mid-January with Blackrock, Bank of NY Melon, Wells Fargo, JP Morgan, Goldman Sachs, Citigroup, US Bancorp, M&T Bank and PNC all reporting between January 13-16.
FED: Bank Stocks Up, Swap Spreads Wider With Barr Leaving As VC Supervision
- Another question, however, was whether Barr would stay on as a Governor through the full term to 2032 (In 2017, Tarullo resigned both the VC position and his Governorship). Since Barr has decided to stay on, that means there are no vacancies in the Board of Governors for Trump to fill. So absent any governors resigning, Trump will have to choose one of the existing governors as the next VC for Supervision.
- In this context, Gov Bowman - a Trump appointee in 2018, and with ample experience in banking - appears to be the most likely choice. She has advocated a lighter regulatory approach than her colleagues.
- Following Barr's resignation announcement, banking stocks are up 1.5%, while swap spreads - which had moved increasingly negative over Barr's term - moved wider in anticipation of less stringent regulations on banks' balance sheets (10Y swap +1.5bp to -48.3bp).
FED: US TSY 26W BILL AUCTION: HIGH 4.110%(ALLOT 86.16%)
- US TSY 26W BILL AUCTION: HIGH 4.110%(ALLOT 86.16%)
- US TSY 26W BILL AUCTION: DEALERS TAKE 21.55% OF COMPETITIVES
- US TSY 26W BILL AUCTION: DIRECTS TAKE 7.98% OF COMPETITIVES
- US TSY 26W BILL AUCTION: INDIRECTS TAKE 70.47% OF COMPETITIVES
- US TSY 26W BILL AUCTION: BID/CVR 3.20
